Taiwan’s Demographic Crunch and its Military Implications

Taiwan’s Demographic Crunch and its Military Implications

Taiwan’s Demographic Crunch and its Military Implications

Michael Mazza is a Research Fellow in the Foreign & Defense Policy Studies program at the American Enterprise Institute.

Trends in Chinese military modernization and the Chinese Communist Party’s (CCP) apparent turn towards a more chauvinistic foreign policy should have Taiwan and its friends worried. Yet, a quieter threat looms, one that is already complicating the island’s efforts to maintain a balance of power conducive to its own security. Taiwan’s population has been aging for some time and will soon begin shrinking. Both trends will constrain manpower resources to the detriment of Taiwan’s national security. In 2011, the Ministry of National Defense described demographic changes as “a secret worry of our national defense.”

According to Taiwan’s National Development Council, the total fertility rate has not been at replacement level since the early 1980s and has evinced a downward trajectory since. Total births have dropped as well.

The island’s population will peak between 2021 and 2025 at nearly 24 million people, and thereafter drop to between 17.3 million and 19.7 million by 2060. The working age population (people aged 15-64) peaked in 2012, and the old-age population (≥65) was projected to surpass the young population (0-14) this past year. Between 2016 and 2060, the size of the young and working-age cohorts is expected to shrink by 43.4percent and 44.2percent, respectively, with the elderly population growing by 131 percent. Taiwan’s median age is expected to grow from 39.9 in 2015 to 57 in 2060. Finally, the dependency ratio—the number of children and elderly per 100 working-age persons—is growing. In 2016, the dependency ratio was 36.2 percent. In 2060, it will rise to 92.9 percent.

What does all of this mean for Taiwan’s national security? These trends have a number of troubling implications. First, with an aging and shrinking population, government tax revenues are almost certain to contract. Meanwhile, the rising dependency ratio—combined, by the way, with lengthening life expectancy—will lead to growing demands for government to step in to support the elderly population, as the working-age cohort is less able to do so directly. The national budget pie is likely to shrink in the coming decades. Even if defense spending does not shrink relative to other line items, it will shrink in absolute terms. Of course, there is a distinct possibility that defense will receive a smaller portion of that shrinking pie if Taiwan finds it must dedicate more and more resources to elderly care.

Allocation of resources is a political decision, but Taiwan’s demographic trends also have a more direct effect on the island’s defense. As Taiwan’s 2017 Quadrennial Defense Review noted, “the impact of our social and economic environment, along with a low birth rate, has been to reduce available manpower, negatively impacting our troop replenishment and operational strength.” The 2015 and 2013 National Defense Reports also raised this issue, but not as fully as the 2011 report:

The number of draft age men has trended downwards in recent years due to the low birth rates; statistics show that the number of draft age men each year has dropped from over 120 thousand to some 110 thousand, and this number will continue to drop in the future…Moreover, competition from similar agencies, such as the police and coast guard, has made talent recruitment more and more difficult.

According to that report, the number of draft age men was projected to drop from 123,465 men in 2010 to 75,338 men in 2025.

Taiwan’s answer to this conundrum has, in part, been to move from a conscripted force to an all-volunteer force. Over the long term, manning a large, conscripted force without negatively affecting the domestic economy will become a growing challenge. The 2011 Ministry of National Defense report argues, “voluntarism will not only maintain forces’ capabilities and allow experiences to be passed down, it will also lift the burden of compulsory military service from citizens, releasing human resources for economic development, and allowing the nation’s human resources to create maximum benefits” (emphasis added). Taiwan’s armed forces will now have to compete for increasingly limited manpower, but they will also need less of it than they once did.

Ideally, moving to a smaller, all-volunteer force will contribute to a better allocation of human resources in Taiwan, while creating a leaner, more professional military. On the other hand, all-volunteer forces are expensive to maintain due to the need to offer competitive pay, benefits, better healthcare, and pensions. This will present a challenge as government revenues decline. Over time, personnel costs in Taiwan will threaten to crowd out spending on training and advanced armaments, which, if anything, become more important the smaller a military becomes—and if tax revenues do decrease over time, mounting political pressure could see the active-duty force shrunk further.

Unfortunately, Taiwan’s shifting demographics may have consequences beyond the active-duty force as well. In Taiwan’s defense strategy, as described in the 2017 QDR, the reserve system plays a key role in “a defense force that deters military threats and denies invasions.” The 2015 National Defense Report put it this way

Force streamlining as well as extensive mobilization and combat readiness systems have been implemented to achieve the concept of having a small standing army with the potential of drawing up vast reserves during wartime and building an elite national defense force. (emphasis added)

This is, of course, sensible. With every citizen a soldier, Taiwan could be incredibly tough for China to swallow should the PLA succeed in establishing a beachhead—this is the ultimate deterrent. But as Taiwan’s population both shrinks and ages, so will the reserve force. Due to the shift to an all-volunteer force, moreover, many reserve personnel will have less military training and experience than during the days of conscription.

What’s more, in the future, limited defense resources are certain to first go to what the Ministry of National Defense hopes will be a professional, effective, high-tech, all-volunteer force. Training for reserve personnel, maintenance of weapons for reserve forces, and stockpiling of supplies will likely be neglected in favor of the active-duty military. Finally, a shrinking working age population will likely increase pressure on the government to minimize reserve training, with further deleterious effects on the reserve force’s effectiveness and, thus, its deterrent value.

Demography may or may not be destiny, but there are steps Taiwan can take to mitigate the national security effects of its troublesome demographic profile. Taiwan’s relationship with the United States will grow only more important as the island grapples with changes in its population structure. As ever, drawing closer to Washington will remain a priority for Taipei.

Relations with Japan are also important. Tokyo and Taipei have overlapping security challenges and both face similar demographic challenges; going forward, they may seek strength in numbers. Japan’s expertise in robotics should be particularly interesting to Taiwan, with has a strong tech sector of its own. There may be opportunities to collaborate in search of technological alternatives to manpower-intensive defense strategies.

The road ahead is a difficult one for Taiwan. A smaller, older population will likely lead to lower government revenues, with a larger share of those revenues dedicated to elderly care. On the other hand, population change is an important impetus behind Taiwan’s shift to an all-volunteer military, which will require greater investment in personnel, materiel, and training if it is to be an effective fighting force. How Taipei manages this tension will have far-reaching effects on Taiwan’s national security in the coming decades.

Main point: Taiwan’s population is aging and will soon begin to shrink. As a result, funding and operating the armed forces will become a growing challenge, with deleterious results for the cross-Strait military balance and for the effectiveness of Taiwan’s deterrent.

¹National Statistics, Republic of China, “Table 4. Number and rates of births, deaths, immigrants and emigrants, marriages and divorces.”
²National Development Council, “Population Projections for ROC (Taiwan): 2016-2060.”
³Ministry of National Defense, National Defense Report, Republic of China (Taipei, Taiwan: Ministry of National Defense, 2011.)
4Ministry of National Defense, National Defense Report, Ministry of National Defense, ROC 2015 (Taipei, Taiwan: Ministry of National Defense, 2015), 68.